Trump’s $11B Tariffs on EU Goods Would Hit Cheese, Wine, Olives

The U.S. says the WTO repeatedly has found that EU subsidies to European aircraft maker Airbus have caused "adverse effects" to the U.S., chiefly to Boeing Co., the American airplane manufacturer

By Carlo Piovano and Paul Wiseman •Published April 9, 2019•Updated on April 9, 2019 at 1:56 pm

AP

The United States wants to tax $11.2 billion worth of EU goods — from airplanes to Gouda cheese — in what some experts say marks another attempt by the Trump administration to use tariffs to reshape global trade in its favor.

The World Trade Organization ruled last year that the European Union provided illegal subsidies to plane maker Airbus.

The U.S. tariff wish-list, released late Monday, reflects the Trump administration's calculation of the harm the EU subsidies have inflicted on the United States — and specifically to Boeing. A WTO arbitrator is expected to rule this summer on how much relief the U.S. is actually entitled to.

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Trade analysts say it isn't unusual for countries to present a tariff target list before the WTO arbitrator sets actual parameters. In the U.S. case, it allows the Office of the U.S. Trade Representative to collect public comments on the potential tariffs. And it lets the EU know which European industries might be hit and perhaps encourage a settlement.

Jennifer Hillman, a former U.S. trade official who also served on the WTO's appellate body, said the U.S. government typically would announce the target list quietly, perhaps through a notice in the Federal Register. Instead, she noted, the Trump administration declared its intentions "with fanfare and hoo-ha" in a press release designed to attract public attention.

"You're scaring a lot of importers" who see the products they bring into the United States on the target list, said Hillman, who now teaches law at Georgetown University. "You're creating chaos in the market."

Economists say the Trump team appears to want to use the ruling not merely to help Boeing but to heighten pressure on trading partners like Germany with which the U.S. has a trade deficit. In the end, more tariffs could further raise consumer prices in the United States and weigh on the global economy at a time when it's showing alarming signs of stress as the U.S. wages a broader trade war with China.

After the U.S. Trade Representative's office issued a list of EU products it wants to tax, President Donald Trump took to Twitter to make the case.

"The EU has taken advantage of the U.S. on trade for many years. It will soon stop!" Trump tweeted Tuesday.

The Trump administration's list of European products to tax includes the types of helicopters and aircraft Airbus makes but also a wide range of European exports: famous cheeses like Stilton, Roquefort and Gouda, wines and oysters but also more obscure exports like ceramics, knives and pajamas.

Chad Bown, a senior fellow at the Peterson Institute for International Economics, said it would be "a game changer" if the United States actually imposed tariffs on Airbus planes.

"We've never done tariffs on airplanes before," he noted.

Normally, countries use favorable WTO rulings to compel trading partners "to give up the bad stuff they were doing" and don't actually end up imposing tariffs. The Trump administration could be different.

"They just like to impose tariffs," Bown said.

While the size of the tariffs is small compared with the hundreds of billions the U.S. and China are taxing in their trade war, it suggests a breakdown in talks with the European Union over trade. The U.S. and EU have been negotiating since last year about how to avoid tariffs that Trump has wanted to impose, with little result.

Trump in June last year imposed tariffs of 25% on steel imports and 10% on imported aluminum from the EU in a move that seems aimed at helping the U.S. industry but has also raised costs for many businesses that import these products.

The EU responded with tariffs on about 2.8 billion euros' worth ($3.4 billion) of U.S. steel, agricultural and other products, from Harley Davidson bikes to orange juice.

The U.S. and EU have since July been negotiating how to scale back the tariffs, with Trump holding out the bigger threat of slapping tariffs on European cars — a huge industry in the region — should the negotiations not yield a result.

The EU responded Tuesday to the U.S.'s latest call for new tariffs by noting that it was based on America's own estimate, not anything it had been awarded by the WTO.

Eric Schweitzer, the head of the Association of German Chambers of Commerce and Industry, lamented the trade tensions.

"There are already more than enough tariffs," he said. "Instead of the U.S. making further threats, both sides should now keep a cool head and aim for de-escalation."

Whether the U.S. gets the legal right to implement the new tariffs will depend on a ruling by the WTO, an organization based in Geneva that sets the rules for global commerce and settles disputes.

After 14 years of legal wrangling between the U.S. and EU, the WTO ruled in May last year that the EU had provided some illegal subsidies to Airbus, hurting Boeing.

The WTO also ruled last month that Boeing received illegal tax breaks from Washington state and that the EU could seek damages. But the ruling was limited: The state tax subsidies came to only about $100 million.

The U.S. attempt to tax Airbus jets comes just as Boeing is facing broad challenges over the global grounding of its 737 Max airliners amid concerns that technical problems could have contributed to two crashes in five months.

Tariffs on European airplanes could in theory help Boeing and hurt Airbus, whose shares were down almost 2% on Tuesday.

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Raf Casert in Brussels and Geir Moulson in Berlin contributed to this report. Wiseman reported from Washington.